GST boon

Jammu and Kashmir will have to pass special laws to be able to implement the Goods and Services Tax (GST) as its current constitutional status does not mandate the applicability of the new indirect tax reform in the State. And once passed it may be the first state in the country to bring real estate within the ambit of GST, the State Finance Minister Haseeb Drabu had indicated. While the Centre and the states had amended the Constitution to move to GST, J and K will have to enact its own laws as it has a special dispensation under the Indian Constitution. While the GST Council has agreed to subsume several taxes, including central excise, state VAT, service tax, central sales tax and octroi, it has kept around a third of state revenues outside the GST ambit. Alcohol, petroleum and real estate are three items on which GST will not be levied. The constitutional status of J and K does not mandate the applicability of the new indirect tax reform in the State. The new tax regime is expected to be rolled out from 1st July, 2017. While service tax is levied all over the country since 1994, it is not applicable in J and K. The State levies its own taxes for services provided in the State. This is because Article 370 of the Constitution grants special autonomous status to the State and Parliament of India has power to make laws only on defence, external affairs and communication related matters of the State. As a result the J and K Assembly will have to pass a legislation making these new laws applicable to the State. Once J and K Assembly passes the laws, the Union Government will have to amend CGST and IGST laws and delete the phrases that they do not apply to the State. Deletion of the phrase will make the laws applicable to the State. A separate law for levy of cess on select goods to make up for a kitty to compensate states for any loss of revenue in first five years of GST rollout extends, however, to whole of India including Jammu and Kashmir. Constitutional impediments itself have kept the State alienated financially and politically which in itself has been the main reason for the backwardness and development remaining far away. To further its financial health J and K will have to march with the nation despite all the differences and GST can be the first step to integration.